Blogs are the New Takeover Bait for Mainstream Media Outlets

Attention all ye weary bloggers, exhausted from constant posting; your labors may finally bear fruit! We have often speculated about the value of blogs. Now Standard & Poor’s is indicating that blogs may be the next round of acquisition targets for investors hungry to cash in on the Web 2.0 frenzy.

The blogosphere continues to grow like topsy; as of September, 2007, blog tracker Technoratiindexed more than 106 million blogs, 12 million more than in the previous month. It has long been a shadow medium, existing alongside traditional media outlets. Now as it demonstrated the ability to garner both readers and advertisers, blogs are gaining more respect. According to a recent article in S&P’s Outlook,

Blogs – especially the big-name brands such as TechCrunch, Gawker, GigaOm, Boing Boing, and the Huffington Post -appear to have attractive business models. This is good news for traditional media companies that are being marginalized online and off, and are hoping to catch up to–and cash in on–a rapidly evolving Web 2.0 world.

Traditional media – especially newspapers which have been bedeviled by rising costs, falling subscribership and dwindling display and classified ad revenues – and bloggers are teaming up to extend their offering and build readership. This has sent valuations, at least on well known blogs, soaring. Advertisers are beginning to link up with A list bloggers and traditional media outlets will no doubt follow the advertisers to the blogosphere.

However blogging is still only a small part of the overall online traffic of newspapers. As Red Herring reporter, Alexandra Berzon, commented in a January 17, 2007 post, Newpapers Go Blog Crazy:

Newspaper blogs still represent only a very small percentage of overall newspaper Web traffic. The top ten newspaper Web sites saw nearly 30 million total viewers in December, 2006-led by The New York Times-up 9% from the year before.

But the growth rates in readership for blogs are tantalizing. A Nielsen/NetRatings release, quoted in the article, showed that the top 10 U.S.-based online newspaper blog pages were up 210 percent year over year.

So how high could blog valuations go? Try this one on for size. In a post on Silicon Alley Insider on October 3, 2007, Henry Blodget cited speculation by analyst Doug McIntyre at 24/7 that Techcrunch, a very popular blog focusing on new Silicon Valley startups, might be sold to CNET for $100 million.

These are all very reasonable. But if we are in a Web 2.0 bubble, as some have suggested, all conventional valuation techniques could be tossed out the windows as companies try to buy a piece of new media real estate.